Fund companies encroaching on banks

Mutual fund companies, which already offer check writing and money market funds that act a lot like savings accounts, are about to compete even more directly with banks to capture assets.

Fidelity Investments last week became the latest mutual fund company to take steps to form a bank which can provide trust services. Fidelity's parent company, FMR Corp., filed an application Jan. 5 with the Office of Thrift Supervision (OTS) to form Fidelity Personal Trust Co.

Fidelity hopes to introduce the new bank this year, said Jim Griffin, a Fidelity spokesperson.

Fidelity will be trying to reach affluent investors who use bank trust departments for investment management, estate planning and tax services. Griffin said that some of Fidelity's high-net-worth investors already have expressed interest in trust services.

Today's affluent, aging investors might be more inclined to take trust business to a fund company because they are familiar with funds and fund company technology, said Geoffrey H. Bobroff, a mutual fund company consultant based in East Greenwich, R.I.

Bank trust department assets mark "the last bastion of assets that haven't moved into the mutual fund industry," Bobroff said.